Afghan central bank governor flees country over Kabul Bank scandal

Afghanistan's top banker, who is alleged to have played a role in the failure of the nation's largest private lender, has fled the country, a spokesman for President Hamid Karzai said Monday.

The former central bank chief Abdul Qadir Fitrat Photo: REUTERS

6:58AM BST 28 Jun 2011

Karzai spokesman Waheed Omar said Fitrat had not notified the Afghan government of his resignation. But he said that Fitrat was named in a report sent on Monday to the Afghan attorney general's office as someone possibly responsible for the failure of Kabul Bank.

Fitrat told The Associated Press in a telephone interview from a Northern Virginia hotel that he left the country because his life had been threatened and that the Karzai government was refusing to prosecute those allegedly involved in fraudulent loans.

"My life has become completely endangered," Fitrat said. "Since I exposed the fraudulent practices on April 27 in parliament I have received information about threats on my life."

He said he has permanent resident status in the United States and would not be returning to Afghanistan.

The former bank governor said he asked for the Karzai government to prosecute those involved in the alleged fraud 10 months ago.

Related Articles

"To date, there is no information of any credible plan to try and prosecute these suspects for the crimes they have allegedly committed", Fitrat said in taking the unusual step of resigning in the U.S. rather than Afghanistan.

Kabul Bank, Afghanistan's largest private financial institution, nearly collapsed last year because of mismanagement and questionable lending practices. The bank – now under the control of Afghanistan's central bank – became a symbol of the country's cronyism and deep-rooted corruption and is now considered a bellwether on attempts to root out patronage and show accountability to world financial institutions, such as the International Monetary Fund.

Afghanistan has stepped up efforts to recover hundreds of millions of dollars in fraudulent loans made by Kabul Bank, which plays a key role in the Afghan economy by handling payrolls for government workers and security forces and has close ties to Afghanistan's ruling elite.

The former bank chairman, Sherkhan Farnood, a world-class poker player who raised money for Karzai's re-election campaign, owned 28 per cent. A brother of one of Afghanistan's two vice presidents was once a shareholder, and Karzai's eldest brother, Mahmood Karzai, had owned 7 per cent.

Besides buying property in Dubai, United Arab Emirates, the shareholders of Kabul Bank took out loans to heavily invest in an airline, fuel and gas companies and two shopping malls in Kabul, Fitrat said earlier this year.

The bank scandal weakened confidence in Afghanistan's financial system and has prevented the IMF from completing a new program for the country.

A report released in May by Afghanistan's anti-corruption office showed about $467 million of outstanding loans were made without appropriate documentation or collateral. A recent USAID inspector general report estimated that fraudulent loans diverted $850 million to bank insiders.

Fitrat last month rejected those allegations. The central bank chief said he asked for forensic auditing help from the IMF and the U.S. Treasury Department after hearing that some used the loans to buy luxurious mansions in Dubai. Some used the money to invest in risky prestige projects like an airline and shopping malls in Kabul.

Fitrat also said more than half of those who benefited from the loans continued to be able to move in and out of Afghanistan, despite central bank efforts to ban them from foreign travel. The bank chief declined to name those individuals, saying criminal law prevented him from releasing their names. The government has seized the passports of a number of bank employees to prevent them from travelling until the investigation is finished, but shareholders passports have not been taken.

The IMF has been reluctant to extend new credit to Afghanistan in the wake of the scandal. The U.N. has said some $70 million in spending for government activities could be withheld without IMF support.

Though international allies and the head of the central bank have called for the Afghan government to prosecute those involved in fraud or other illegal activity at Kabul Bank, the investigatory commission said that any decision on who to take to court will be made by Karzai. Karzai's administration has previously blocked attempts to go after his close associates for corruption or misconduct.